Cooper Tire and Rubber (CTB) booked record sales that led to a stronger-than-expected 34% improvement in first-quarter profit, though the company said it expects to face continued challenges with heavy costs for raw materials heading into at least the third-quarter.

While demand has been climbing, the company has been dealing with higher costs for raw materials, which were up $164 million last quarter, more than offsetting improved prices.

Still, the Findlay, Ohio-based company posted net income of $15.6 million, or 25 cents a share, compared with $11.6 million, or 20 cents a share, in the same quarter last year, trumping the Street’s view of 22 cents.

Earnings included an after-tax gain of $3 million related to the acquisition of a controlling interest in Corporacion de Occidente SA de CV, partially offset by $4 million in costs related to the expiration of a 10-year lease for the company’s airplane. The year-earlier period was impacted by $8 million of restructuring charges and $22 million of increased costs for an adverse verdict in a products liability case.

Quarterly revenue for the maker of replacement tires increased 20% to $906 million from $754.4 million a year ago, narrowly missing the Street’s view of $909.2 million.

North American tire operations climbed 22% to $648 million during the quarter, led by an improved price mix and higher unit sales. International sales, meanwhile, hit a record high of $363 million, a year-over-year increase of 24%.

Further helping the results were lower products liability expenses and restructuring charges, higher volumes and improved manufacturing and prices. Selling, general and administrative costs, which widened by $8 million during the quarter, and increased costs for raw materials offset some of the gains.

“Despite elevated raw material costs, we continued making improvements to our underlying operations and delivered solid operating profits during the quarter,” Cooper Tire and Rubber CEO Roy Armes said in a statement. “In addition to the work we have done to improve costs, we have implemented price increases in a variety of ways around the globe to address these pressures.”

Despite the challenges, the company still intends to produce 10% more units in 2011 than it did a year ago to help meet rising demand. The company expects raw materials costs to remain at elevated levels, though it anticipates a deceleration by the third-quarter.

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